In just a few days, I’ll be speaking at a conference sponsored by research firm IDC and IT World Canada. I’ll be heading a panel exploring leadership in an era of digital disruption. As with every other chance I get, I will make the case that economy is moving through a quantum shift. I will further go on to tell that audience and any other that will listen that what is needed now is not more talk – admiring the problem gets us nowhere. What is needed is action – and that requires real leadership.
Our future prosperity will be determined by our ability to have a leadership position in the new digital economy. There is not a sane economist, business leader or politician who would deny this imperative.
Given that, who the heck drafted this budget? Where is the leadership?
We know a great deal about the danger of falling victim to the new digital economy. Publishing and media were among the first to be disrupted – and to feel the impact of that disruption. We are also a perfect example of how politicians of all stripes have offered a lot of talk and precious little in the way of leadership or action.
As Ian Morrison so succinctly put it in his budget analysis for the Friends of Canadian Broadcasting, “it’s two minutes to midnight for Canadian media, particularly in small and medium markets where a majority of Canadians live.” Further, Morrison goes on to truly outline the dire circumstances that media find themselves in with “clear evidence of newspapers shuttering and projections that up to half of Canada’s local television stations may fade to black by 2020.”
Given those dire predictions, it might be comforting to hear that the government understands the predicament. In the section titled “An Open, Transparent and Innovative Internet” the government’s understanding is clearly shown:
“The Government also recognizes that Canada’s media industries, and the systems that allow for broadcasting, distribution and the exchange of ideas, are fundamentally changing in the digital age,” it states. “Canada’s creative industries are facing rapid and disruptive change, including the shift to online technologies, the push for new business models, and increased competition due to globalization. Along with these risks comes the opportunity for Canada—and its creative sector—to lead the way in creating new experiences, new technologies, and new, well-paying jobs for Canadians.
Make no mistake about it. The crisis in media is not new. The industry has been reeling from the impact of digital disruption for over a decade. The industry, by one report, has lost more than 10,000 jobs since 2008.
Who cares? Well, in an economy that is driven by information, digital information, in particular, digital media should be at the forefront. Or to put it another way, in a world where companies like Facebook, Google, and Amazon have replaced industrial companies at the forefront of the economy, where Silicon Valley replaces what is now called the “rust belt” – digital media is important. So what exactly is the government doing about this, other than acknowledging the issue? Given that urgency and recognition, what is the government’s action plan? The short answer – in this budget – not much.
What I can find amounts to another promise. “Over the next year, the Government will outline a new approach to growing Canada’s creative sector—one that is focused on the future, and on bringing the best of Canada to the world, rather than a protectionist stance that restricts growth and limits opportunities.”
Talk is cheap. Transforming an industry – or in this case, an entire economy requires real leadership and an enormous level of investment. Sadly, the 2017 budget falls short in both categories.
And with digital disruption looming, the consequences to the Canadian economy are dire. From 2004 to 2008, the manufacturing industry in Canada lost over 300,000 jobs – almost one in 10. Where did those jobs go? Largely to cheaper wage economies as part of globalization.
But, as befits a Canadian story, let me quote that famous Canadian, Randy Bachman who said, “baby, you ain’t seen nothin’ yet.”
As extreme as the losses to globalization might be, according to the the head of the government’s economic growth advisory council, McKinsey chief Dominic Barton, the Canadian economy is poised to lose 40 per cent of our manufacturing jobs due to digital disruption and automation. Forty per cent. Four zero. If true, the impact will be extraordinary and losses to date in all areas will equate to a Statistics Canada rounding error.
And given that – what is the response in the current budget? Pretty much the “same old, same old.” There is admittedly some new spending in a few key areas as reported by the CBC:
- Skills: New agency to research and measure skills development, starting 2018-19.
- Innovation: $950 million over five years to support business-led “superclusters.”
- Startups: $400 million over three years for a new venture capital catalyst initiative.
- AI: $125 million to launch a pan-Canadian Artificial Intelligence Strategy.
- Coding kids: $50 million over two years for initiatives to teach children to code.
You might be impressed by the numbers, but when you dig a little deeper, and get past the game of re-announcing already committed funds and packaging multi-year investments to make the amounts seem larger, you’ll see nothing resembling the bold direction or leadership necessary to meet the challenges of the new economy.
In the all-talk, little-action arena there is new government agency proposed to deal with innovation, but no definitive goals or actions. Innovation sounds great, as does the idea of startups until you factor out the multi-year investments. The promised $950 million over five years for these undefined “superclusters” is less than $200 million per year – that’s a drop in the bucket given the magnitude of transformation.
And where will it be spent? To some extent, the lack of investment may be for the best. As one commentator said, “I don’t know what a supercluster is.” In a country awash with support groups, incubators, and accelerators, if you really think a new organization or structure is going to drive innovation, you’d best be able to define what and how. New economy companies don’t need another agency to talk to – they need money, talent, and opportunities to sell their products.
The budget does allocate some funds to the perennial poster children of the new economy – startups. There is $400 million for startups, but once again, that is subject to the multi-year slight of hand. While one could never argue that startups don’t need cash, increasingly they have another need – talent. Engineers are in short supply everywhere. What is the budget’s answer? There is clever idea of a program “coding kids” to get kids pointed in the right direction. Good idea but unlikely that it will have any impact on the mass of unfilled technology jobs in this country. Once again, even this is split over two years.
Wasted opportunity
What could the government have done? I have focused on the spending, but in our battle with digital disruption – it’s not always how big the investment is – it’s how bold it is. Paretto’s law reigns supreme in a digital transformation – a small and well-targeted investment can yield huge results.
Fresh, disruptive ideas are what is needed. What might these be?
What about a making us the most educated population on the planet? How about getting strongly behind private sector programs where at-risk youth are given a shot at high-tech careers. Anyone who has tried to hire new people to fit the new agile digital workplace will know that it’s hard to find good, trained people. If we really focused on building these skills and keeping them in Canada, how well would we do?
How can we accumulate capital for investment in these new digital and innovative businesses? When we do develop these new digital companies, we need to find ways to keep them here. One idea that has real traction is for the government to become customers for these new companies. Make it easy for governments of all stripes – municipal, provincial, and municipal – to buy the services and products of these new companies. Focus on getting private companies to do the same. If we spend just a portion of that on products and services from innovative digital companies investment would be much less of an issue. And the survival of companies beyond the startup and continued growth in Canada would be much less of an issue.
Those are just a couple of ideas. Are they what it takes? Maybe, maybe not. But maybe this government that seems to pride itself on consultation should really get out there and consult. Quickly. There are lots of bold thinkers and ideas out there. There is an entire group of leaders from BlackBerry founders Mike Lazardis and Jim Balsillie, to Tobias Lutke, the founder of Shopify, to Tony Lacavera or others who could provide real advice to a government that was prepared to listen and act boldly. Unfortunately, we didn’t see their ideas in this 2017 budget.
The lack of transformation in the Canadian economy is a huge threat to our current and future prosperity. We need a better – and bolder – plan. The ideas are out there, if only the government could hear them and really champion the digital transformation of the Canadian economy.
The bottom line?
Canada is faced with a loss of jobs from globalization, the potential of a new protectionism from our oldest and biggest trading partner, the third impact of automation, and digital disruption is now a runaway train. Every other country in the world is vying for leadership. In that world, this budget is full of platitudes and low on real, practical targeted and new investment.
It makes a passing feint at startups. It talks about training, reskilling and all those good things. But there is no bold move, no grand vision or leadership. We remain a deer in the headlights of the oncoming locomotive of change.
What do you think? Do you have an idea that should have been in this budget? Please leave your suggestions in the comments below.
